Implemented in 2006, Medicare prescription drug benefit (Part D) spent $65.8 billion for prescription drugs in 2011, according to the Congressional Budget Office. But Medicare beneficiaries are overpaying by hundreds of dollars annually because of difficulties selecting the ideal prescription drug plan for their medical needs, an investigation by the University of Pittsburgh Graduate School of Public Health reveals. Their work also could be useful in designing health insurance exchanges, which are state-regulated organizations created under the Affordable Care Act ("Obamacare") to offer standardized health care plans.

Only 5.2 percent of beneficiaries chose the least-expensive Medicare prescription drug benefit (Part D) plan that satisfied their medical needs in 2009, overspending on Part D premiums and prescription drugs by an average of $368 each per year. The evaluation took a national look at how well beneficiaries were making plan choices in the fourth year of the Medicare Part D program and could help guide changes to health insurance programs.

Their solution, unfortunately, is even more government employees to counsel recipients, which may cost a lot more than $368 per year. "In particular, government officials could recommend the three most appropriate Part D plans for each person, based on their medication history," said co-author Yuting Zhang, Ph.D., associate professor of health economics at Pitt Public Health. "Alternatively, they could assign beneficiaries to the best plan for them based on their medication needs, while offering them the option to choose another plan instead. In designing health insurance exchanges, models with more active assistance would be more helpful than models with large numbers of plans and information. For example, health insurance exchanges could actively screen plans on quality and negotiate premiums to reduce the number of plans."

The researchers looked at the difference in a patient's total spending, including the plan premium and out-of-pocket payment for the prescriptions filled, between the plan the patient chose and the cheapest alternative option in the region that would satisfy the patient's medication needs. The study looked at data for 412,712 people, with an average age of 75.

Beneficiaries tend to overprotect themselves by purchasing plans with more generous features, such as generic drug coverage in the coverage gap.

A few other trends emerged: As beneficiaries aged, they increasingly chose more expensive plans, with people older than 85 overspending by $30 more than people 65 to 69 years old. Blacks, Hispanics and Native Americans chose less expensive plans than whites.

People with common medical conditions, such as diabetes and chronic heart failure, were not significantly more likely to choose more expensive plans. People with cognitive deficits or mental health issues, such as Alzheimer's disease, tended to choose less expensive plans, spending an average of $10 less than those without such conditions. The researchers could not determine if those people had assistance from caregivers.

As the number of plan options increased in a region, the amount of overspending increased by $3.20 for every additional plan available.

"A previous study showed that in 2006, beneficiaries could have saved nearly 31 percent of their total drug spending by switching to the lowest cost plan," said lead author Chao Zhou, Ph.D., a post-doctoral associate at Pitt Public Health. "Since our results are similar, this suggests people are not learning to reduce overspending." One possible explanation for these consistent results over time is the impact of inertia and bias toward maintaining the status quo, she noted.

"When Medicare Part D started in 2006, the majority of beneficiaries did not choose the least expensive plan," said Zhou. "Over time, they may have simply stuck to their original plan and never switched to a better one. Beneficiaries might not spend much time researching and adjusting their plan choices based on changes in their medication needs and in plan options."

Findings from the private health insurance market support the authors' conclusion that people keep their current plan instead of spending time researching and optimizing their plan choices based on their insurance use and prescription spending in the previous year.

Comments

Beneficiaries tend to overprotect themselves by purchasing plans with more generous features, such as generic drug coverage in the coverage gap.

If found this particular statement interesting in its naivete. In my view, what we are seeing is the result of people recognizing that the failure to adequately protect oneself leaves no options for error or correction later. So, people tend to be over-protective, so they don't have to face the consequences of something happening and then not being covered.

The whole issue is idiotic on the face of it. This is what comes of not having national health care.

On my celiac article a Canadian notes that their health service does not cover the test and they don't want to spend the money personally. People will put themselves at risk if they have to spend any money of their own once health care is nationalized. So at least old people are overspending because they are smart about it.

I think this article is basically one of about a million that are finding reasons people should like the rather flawed ACA. Like you, I thought they should just nationalize it or leave it alone, instead of having the cesspool of mismanagement and high cost we are about to get.

People put themselves at risk under any system in which they have to pay. That's one reason why the pre-existing conditions issue is so insidious. If an individual can't get coverage, then we can be pretty confident that this is the one area in which they will not seek diagnosis.

So at least old people are overspending because they are smart about it.

I don't know about being "smart about it", but they are certainly wary of the system. To many, we like to engage in "gotcha" economics. In many ways this illustrates exactly the kind of problem we've been talking about regarding many of the science-related issues whether it be GM foods or chemicals, etc.

As illustrated by this example, the public will tend to be over-cautious if there's any possibility that they might be caught unprotected, and as a result one could argue that this is an actual manifestation of their willingness to engage in the precautionary principle.

It's little wonder that they don't accept the assurances of the government or corporations, any more than I would expect them to take the assurances of this study [or the various counselors] to guarantee that they have the coverage they need.

In our society, the concept of trusting what you're told is, too often, simply referred to as gullibility.

BTW, there is a qualification on the Canadian example since this may be different for different provinces. So, in some cases it may be completely covered, in others not [that's from the Canadian Celiac Association].

"People will put themselves at risk if they have to spend any money of their own once health care is nationalized. So at least old people are overspending because they are smart about it."

This is true in part. The U.K. case is one in which well-to-do people are purchasing supplementary coverage and private, almost concierge care to avoid the lowest-common-denominator approach of the NHS. This trend is also trickling down, and access to a private physician has become a mark of social status to which people now aspire. The Canadians were smart enough to realize that genuinely government-run clinics could be a disaster in any cultural setting in which individual achievement is valued, and opted instead to create a system of government payment, avoiding many of the U.K.'s problems.